In this installment of the Butterfly Effect, climate change is creating incredible economic opportunity in the Arctic, leading to saber rattling from Canada and Russia. Whichever region benefits the most will have enormous geopolitical consequences.

In August 2007, a robotic Russian sub planted a titanium flag on the seabed at the North Pole, an act dismissed as a PR stunt by diplomats in Ottawa and Washington until Russian bombers promptly resumed Arctic patrols for the first time since the Cold War. A few weeks later, the U.S. National Ice Center reported that the fabled Northwest Passage was open and ice-free for the first time in history, theoretically shrinking the distance (and costs) between Asia and Europe by as much as 25%, presuming Canada was willing to let ships use it. The prospect of a Northwest Passage open to commercial traffic could
cause a massive shift in the world’s trading lanes, drive
sovereignty-obsessed nations to militarize the Arctic, and eventually
watch in horror as resource-rich Greenland and Quebec raise the cash (and armed forces) to
become the North’s breakaway republics.

The Arctic lost nearly half its icepack in summer 2007, alarming climatologists while causing the North’s governments to salivate. The Russian Ministry of Natural Resources calculates the Arctic might contain twice the proven oil reserves of Saudi Arabia. The contours of the race to “carve up” the Arctic were revealed in the latest batch of leaked WikiLeaks cables released last month. “The twenty-first century will see a fight for resources, and Russia should not be defeated in this fight,” Russian Ambassador to NATO Dimitry Rogozin was quoted as saying in a 2010 cable. “NATO has sensed where the wind comes from. It comes from the North.”

2. Navigating the Northwest Passage

The dream of a Northwest Passage up Baffin Bay, through the Arctic Archipelago and into the Beaufort and then Bering Seas is as old as Captain Cook or Henry Hudson. But many ships and many more men have been lost trying to navigate the route. Climate change has done the work that explorers could not. It is may be a matter of time before the Arctic Ocean
is completely ice-free in the summer, whether it’s 2100 or 2030 (depending on which model you believe).

A shorter route between Europe and Asia minus the geopolitical headaches makes as much sense as ever. A container ship leaving Yokohama bound for Rotterdam takes currently takes 29 days to round the Cape of Good Hope, or 22 days via Singapore, the Strait of Malacca and the Suez Canal. An Arctic route could cut that to 15 days, bypassing an saber-rattling Chinese navy, Malay and Somali pirates, and the burden of paying canal fees.

The Northwest Passage could save a ship as much as $3.5 million per trip, according to Scott G. Borgerson, a fellow at the Council on Foreign Relations. The passage would accelerate the movement toward “Post Panamax” ships like the Emma Maersk, which can carry 15,000 shipping containers–three times the size of what can now squeeze through the Panama Canal. “In an age of just-in-time delivery, and with increasing fuel costs eating into the profits of shipping companies, reducing long-haul sailing distances by as much as 40 percent could usher in a new phase of globalization,” Borgerson wrote in an article for Foreign Affairs. World-spanning supply chains would preserve their fossil-fuel-dependent cost advantage a little while longer, thanks in no small part to the oil being pumped out of the Arctic.

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3. “Use It Or Lose It”

This assumes, of course, that Canada will let them pass. Current prime minister Stephen Harper has made Canada’s claims to the North a signature issue since his 2006 elections campaign, including the assertion that the Northwest Passage falls within its territorial waters. “Canada has a choice when it comes to defending our sovereignty in the Arctic,” he said in 2007, “either we use it or we lose it. And make no mistake–this government intends to use it.”

In 2009, Harper’s Conservative government published the “Northern Strategy,” outlining plans to build up to eight patrol ships capable of breaking ice, increased radar and surveillance satellites, more troops, new training bases, and a deepwater resupply port–although it appears to be in no rush to implement any of it. “Canada’s position has not changed much over decades, but the rhetoric fluctuates between accommodating and borderline belligerent,” says Bruce Forbes, a research professor at the Arctic Centre at the University of Lapland in Finland. “But I would take it as so much bluster from Harper.”

Still, the unlikely vision of an armed and dangerous Canada is helping fuel a polar arms race in which the U.S., ironically, is the one falling far behind. While Russia is expanding its fleet of heavy icebreakers to 18–including the nuclear-powered 50 Years of Victory, the world’s largest–Canada has one and the United States none. That’s in addition to Russia’s plans to rebuild its nuclear submarine and carrier fleets. “While in the Arctic there is peace and stability, one cannot exclude that in the future there will be a redistribution of power, up to armed intervention,” Russian Navy chief Admiral Vladimir Vysotsky is quoted as saying in a 2008 cable.

4.Le Passage du Nord-Ouest?

Considering Harper’s obsession with sovereignty, the most ironic outcome of an Arctic open for business would be a resource-rich breakaway republic of Quebec. Last month, the province–whose French-speaking residents Harper symbolically acknowledged as a “nation within a united Canada”–unveiled “Plan Nord,” a $532 million strategy to develop 450,000 square miles in the far north, using the Northwest Passage as a mechanism to exploit the minerals buried in the tundra.

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“We’re building a parallel canal to the Panama Canal for Chinese ships so they can accelerate the transport of goods,” Jean Charest, the Premier of Québec, told Fortune. During the decades it will take for the Passage to open, Asian markets for raw materials will continue to grow voraciously. From a narrow economic perspective, climate change will be the best thing that’s happened to Quebec since Jacques Cartier foundered on the rapids at Montreal while searching for the–wait for it–Northwest Passage.

Complicating things for Canada is Quebec’s “special status,” including the fact that it nearly seceded from the union twice, most recently in 1995, when the measure was defeated by a very narrow margin. What might a Quebec grown rich on trade and mineral wealth decide in 2035?

By then it may follow a trail blazed by Greenland, a Danish overseas territory granted home rule in 1979. Two years ago, Denmark relinquished control over the island’s natural resources while retaining its authority in defense and foreign affairs. The only thing holding Greenland back from full independence is Denmark’s financial assistance. The proto-country “is ‘just one big oil strike away’ from economic and independence’” the U.S. ambassador to Denmark concluded in 2007, and the U.S. “has a unique opportunity to shape the circumstances” by helping them tap their unproven reserves, which might “rival Alaska’s North Slope.”

“If there’s oil money, they would be able to say they don’t need the protection and transfer payments [from Denmark] anymore,” says Forbes. “That may be more likely in the long term than Quebec’s [independece], but if Plan Nord goes through, that may change.”